ETF Comparison: iShares Bitcoin Trust ETF (IBIT) Versus Grayscale Bitcoin Mini Trust ETF (BTC)

IBIT vs BTC: Total cost of ownership

Both IBIT and BTC are relatively affordable, especially when compared to older Bitcoin futures ETFs that charge a steep 0.95% in annual fees.

IBIT charges a 0.25% sponsor fee. However, there’s a temporary waiver for the first 12 months beginning January 11, 2024, reducing the fee to 0.12% on the first $5 billion in assets.

On the other hand, BTC is more straightforward. It carries a 0.15% expense ratio with no waivers or temporary discounts. What you see is what you’ll pay moving forward.

Trading costs are another consideration. IBIT boasts a tight 0.021% 30-day median bid-ask spread, while BTC’s spread sits at 0.079%, more than three times as much. While both are still small, this difference matters for frequent traders.

Verdict: Overall, factoring in trading costs and the eventual expiration of IBIT’s waiver, BTC emerges as the slightly cheaper option for long-term buy-and-hold investors.

IBIT vs BTC: Methodology and holdings

Both IBIT and BTC deliver spot Bitcoin exposure but track different benchmarks.

IBIT uses the CME CF Bitcoin Reference Rate – New York Variant. This benchmark aggregates trade data from multiple Bitcoin-USD markets, but only those that meet CME CF Constituent Exchange Criteria—essentially ensuring higher quality and reliability.

BTC, on the other hand, tracks the CoinDesk Bitcoin Price Index. This benchmark has been around for years and serves as an industry-provided alternative to more institutional options like IBIT’s.

When it comes to holdings, there’s not much to discuss—it’s spot Bitcoin held in trust with custodians. Both ETFs rely on Coinbase Custody Trust Company, LLC to store their Bitcoin securely.

Finally, it’s worth noting that neither ETF is an investment company registered under the Investment Company Act of 1940, meaning they aren’t regulated like typical ETFs. Instead, both operate as grantor trusts, a structure commonly used for gold ETFs.

Verdict: This point is largely moot. While the benchmarks differ, it doesn’t change the fact that both ETFs fundamentally provide spot Bitcoin exposure—the core purpose for investors.

IBIT vs BTC: Performance and risk

There’s no point diving too deep into performance and risk here—both IBIT and BTC have only been around for a short while. Bitcoin itself has performed exceptionally well recently, but as investors know, it’s a highly volatile asset, prone to dramatic swings both up and down.

Instead, focus on replication quality. The key metrics to watch are tracking error and tracking difference, which measure how closely an ETF mirrors the spot price of Bitcoin. These are particularly important for spot Bitcoin ETFs, as deviations can signal inefficiencies in trading, custody, or fund management.

Right now, IBIT shows better replication metrics, with lower tracking error and tighter alignment to the Bitcoin price. However, the evaluation period is still very short, and it’s reasonable to expect BTC to tighten up its metrics over time as the fund matures.

Verdict: IBIT takes the edge for now, but it’s too early to declare a clear winner. I expect BTC to close the gap as time goes on.

This article is for informational purposes only and does not in any way constitute investment advice. The author may express their own opinions, which may not represent the opinions of ETF Central or its affiliated partners. It is essential that you seek advice from a registered financial professional prior to making any investment decisions.